Country Default Spreads and Risk Premiums

Last updated: January 8, 2021

This table summarizes the latest bond ratings and appropriate default spreads for different countries. While you can use these numbers as rough estimates of country risk premiums, you may want to modify the premia to reflect the additonal risk of equity markets. To estimate the long term country equity risk premium, I start with a default spread, which I obtain in one of two ways:
(1) I use the local currency sovereign rating (from Moody's: www.moodys.com) and estimate the default spread for that rating (based upon traded country bonds) over a default free government bond rate. For countries without a Moody's rating but with an S&P rating, I use the Moody's equivalent of the S&P rating. To get the default spreads by sovereign rating, I use the CDS spreads and compute the average CDS spread by rating. Using that number as a basis, I extrapolate for those ratings for which I have no CDS spreads.
(2) I start with the CDS spread for the country, if one is available and subtract out the US CDS spread, since my mature market premium is derived from the US market. That difference becomes the country spread. For the few countries that have CDS spreads that are lower than the US, I will get a negative number.
You can add just this default spread to the mature market premium to arrive at the total equity risk premium. I add an additional step. In the short term especially, the equity country risk premium is likely to be greater than the country's default spread. You can estimate an adjusted country risk premium by multiplying the default spread by the relative equity market volatility for that market (Std dev in country equity market/Std dev in country bond).  Sicnce government   bonds are  not available or traded in most countries, I approximate the relative equity market volatility by estimating the standard deviations in two indices, the S&P emerging market equity index (for equities) and the S&P emerging market government bond index (for government bonds), and using that ratio for all countries to estimate the additional country risk premium. Finally, I add that country risk premium to my estimate of a mature market equity risk premium, for which I use the implied equity ris premium of the S&P 500.


Country Africa Moody's rating Rating-based Default Spread Total Equity Risk Premium Country Risk Premium
Abu Dhabi Middle East Aa2 0.44% 5.20% 0.48%
Albania Eastern Europe & Russia B1 3.98% 9.08% 4.36%
Andorra (Principality of) Western Europe Caa1 6.63% 11.98% 7.26%
Angola Africa Caa1 6.63% 11.98% 7.26%
Argentina Central and South America Ca 10.60% 16.34% 11.62%
Armenia Eastern Europe & Russia Ba3 3.18% 8.21% 3.49%
Aruba Caribbean Baa1 1.41% 6.27% 1.55%
Australia Australia & New Zealand Aaa 0.00% 4.72% 0.00%
Austria Western Europe Aa1 0.35% 5.10% 0.38%
Azerbaijan Eastern Europe & Russia Ba2 2.65% 7.63% 2.91%
Bahamas Caribbean Ba2 2.65% 7.63% 2.91%
Bahrain Middle East B2 4.86% 10.05% 5.33%
Bangladesh Asia Ba3 3.18% 8.21% 3.49%
Barbados Caribbean Caa1 6.63% 11.98% 7.26%
Belarus Eastern Europe & Russia B3 5.75% 11.02% 6.30%
Belgium Western Europe Aa3 0.53% 5.31% 0.59%
Belize Central and South America Caa3 8.83% 14.40% 9.68%
Benin Africa B2 4.86% 10.05% 5.33%
Bermuda Caribbean A2 0.75% 5.54% 0.82%
Bolivia Central and South America B2 4.86% 10.05% 5.33%
Bosnia and Herzegovina Eastern Europe & Russia B3 5.75% 11.02% 6.30%
Botswana Africa A2 0.75% 5.54% 0.82%
Brazil Central and South America Ba2 2.65% 7.63% 2.91%
Bulgaria Eastern Europe & Russia Baa1 1.41% 6.27% 1.55%
Burkina Faso Africa B2 4.86% 10.05% 5.33%
Cambodia Asia B2 4.86% 10.05% 5.33%
Cameroon Africa B2 4.86% 10.05% 5.33%
Canada North America Aaa 0.00% 4.72% 0.00%
Cape Verde Africa B2 4.86% 10.05% 5.33%
Cayman Islands Caribbean Aa3 0.53% 5.31% 0.59%
Chile Central and South America A1 0.62% 5.40% 0.68%
China Asia A1 0.62% 5.40% 0.68%
Colombia Central and South America Baa2 1.68% 6.56% 1.84%
Congo (Democratic Republic of) Africa Caa1 6.63% 11.98% 7.26%
Congo (Republic of) Africa Caa2 7.96% 13.44% 8.72%
Cook Islands Australia & New Zealand B1 3.98% 9.08% 4.36%
Costa Rica Central and South America B2 4.86% 10.05% 5.33%
Côte d'Ivoire Africa Ba3 3.18% 8.21% 3.49%
Croatia Eastern Europe & Russia Ba1 2.21% 7.14% 2.42%
Cuba Caribbean Caa2 7.96% 13.44% 8.72%
Curacao Caribbean A3 1.06% 5.88% 1.16%
Cyprus Western Europe Ba2 2.65% 7.63% 2.91%
Czech Republic Eastern Europe & Russia Aa3 0.53% 5.31% 0.59%
Denmark Western Europe Aaa 0.00% 4.72% 0.00%
Dominican Republic Caribbean Ba3 3.18% 8.21% 3.49%
Ecuador Central and South America Caa3 8.83% 14.40% 9.68%
Egypt Africa B2 4.86% 10.05% 5.33%
El Salvador Central and South America B3 5.75% 11.02% 6.30%
Estonia Eastern Europe & Russia A1 0.62% 5.40% 0.68%
Ethiopia Africa B2 4.86% 10.05% 5.33%
Fiji Asia Ba3 3.18% 8.21% 3.49%
Finland Western Europe Aa1 0.35% 5.10% 0.38%
France Western Europe Aa2 0.44% 5.20% 0.48%
Gabon Africa Caa1 6.63% 11.98% 7.26%
Georgia Eastern Europe & Russia Ba2 2.65% 7.63% 2.91%
Germany Western Europe Aaa 0.00% 4.72% 0.00%
Ghana Africa B3 5.75% 11.02% 6.30%
Greece Western Europe Ba3 3.18% 8.21% 3.49%
Guatemala Central and South America Ba1 2.21% 7.14% 2.42%
Guernsey (States of) Western Europe Aaa 0.00% 4.72% 0.00%
Honduras Central and South America B1 3.98% 9.08% 4.36%
Hong Kong Asia Aa3 0.53% 5.31% 0.59%
Hungary Eastern Europe & Russia Baa3 1.95% 6.85% 2.13%
Iceland Western Europe A2 0.75% 5.54% 0.82%
India Asia Baa3 1.95% 6.85% 2.13%
Indonesia Asia Baa2 1.68% 6.56% 1.84%
Iraq Middle East Caa1 6.63% 11.98% 7.26%
Ireland Western Europe A2 0.75% 5.54% 0.82%
Isle of Man Western Europe Aa3 0.53% 5.31% 0.59%
Israel Middle East A1 0.62% 5.40% 0.68%
Italy Western Europe Baa3 1.95% 6.85% 2.13%
Jamaica Caribbean B2 4.86% 10.05% 5.33%
Japan Asia A1 0.62% 5.40% 0.68%
Jersey (States of) Western Europe Aaa 0.00% 4.72% 0.00%
Jordan Middle East B1 3.98% 9.08% 4.36%
Kazakhstan Eastern Europe & Russia Baa3 1.95% 6.85% 2.13%
Kenya Africa B2 4.86% 10.05% 5.33%
Korea Asia Aa2 0.44% 5.20% 0.48%
Kuwait Middle East A1 0.62% 5.40% 0.68%
Kyrgyzstan Eastern Europe & Russia B2 4.86% 10.05% 5.33%
Laos Asia Caa2 7.96% 13.44% 8.72%
Latvia Eastern Europe & Russia A3 1.06% 5.88% 1.16%
Lebanon Middle East C 17.50% 23.90% 19.18%
Liechtenstein Western Europe Aaa 0.00% 4.72% 0.00%
Lithuania Eastern Europe & Russia A3 1.06% 5.88% 1.16%
Luxembourg Western Europe Aaa 0.00% 4.72% 0.00%
Macao Asia Aa3 0.53% 5.31% 0.59%
Macedonia Eastern Europe & Russia Ba3 3.18% 8.21% 3.49%
Malaysia Asia A3 1.06% 5.88% 1.16%
Maldives Asia B3 5.75% 11.02% 6.30%
Mali Africa Caa1 6.63% 11.98% 7.26%
Malta Western Europe A2 0.75% 5.54% 0.82%
Mauritius Asia Baa1 1.41% 6.27% 1.55%
Mexico Central and South America Baa1 1.41% 6.27% 1.55%
Moldova Eastern Europe & Russia B3 5.75% 11.02% 6.30%
Mongolia Asia B3 5.75% 11.02% 6.30%
Montenegro Eastern Europe & Russia B1 3.98% 9.08% 4.36%
Montserrat Caribbean Baa3 1.95% 6.85% 2.13%
Morocco Africa Ba1 2.21% 7.14% 2.42%
Mozambique Africa Caa2 7.96% 13.44% 8.72%
Namibia Africa Ba3 3.18% 8.21% 3.49%
Netherlands Western Europe Aaa 0.00% 4.72% 0.00%
New Zealand Australia & New Zealand Aaa 0.00% 4.72% 0.00%
Nicaragua Central and South America B3 5.75% 11.02% 6.30%
Niger Africa B3 5.75% 11.02% 6.30%
Nigeria Africa B2 4.86% 10.05% 5.33%
Norway Western Europe Aaa 0.00% 4.72% 0.00%
Oman Middle East Ba3 3.18% 8.21% 3.49%
Pakistan Asia B3 5.75% 11.02% 6.30%
Panama Central and South America Baa1 1.41% 6.27% 1.55%
Papua New Guinea Asia B2 4.86% 10.05% 5.33%
Paraguay Central and South America Ba1 2.21% 7.14% 2.42%
Peru Central and South America A3 1.06% 5.88% 1.16%
Philippines Asia Baa2 1.68% 6.56% 1.84%
Poland Eastern Europe & Russia A2 0.75% 5.54% 0.82%
Portugal Western Europe Baa3 1.95% 6.85% 2.13%
Qatar Middle East Aa3 0.53% 5.31% 0.59%
Ras Al Khaimah (Emirate of) Middle East Aaa 0.00% 4.72% 0.00%
Romania Eastern Europe & Russia Baa3 1.95% 6.85% 2.13%
Russia Eastern Europe & Russia Baa3 1.95% 6.85% 2.13%
Rwanda Africa B2 4.86% 10.05% 5.33%
Saudi Arabia Middle East A1 0.62% 5.40% 0.68%
Senegal Africa Ba3 3.18% 8.21% 3.49%
Serbia Eastern Europe & Russia Ba3 3.18% 8.21% 3.49%
Sharjah Middle East Baa2 1.68% 6.56% 1.84%
Singapore Asia Aaa 0.00% 4.72% 0.00%
Slovakia Eastern Europe & Russia A2 0.75% 5.54% 0.82%
Slovenia Eastern Europe & Russia A3 1.06% 5.88% 1.16%
Solomon Islands Asia B3 5.75% 11.02% 6.30%
South Africa Africa Ba2 2.65% 7.63% 2.91%
Spain Western Europe Baa1 1.41% 6.27% 1.55%
Sri Lanka Asia Caa1 6.63% 11.98% 7.26%
St. Maarten Caribbean Baa3 1.95% 6.85% 2.13%
St. Vincent & the Grenadines Caribbean B3 5.75% 11.02% 6.30%
Suriname Central and South America Caa3 8.83% 14.40% 9.68%
Swaziland Africa B3 5.75% 11.02% 6.30%
Sweden Western Europe Aaa 0.00% 4.72% 0.00%
Switzerland Western Europe Aaa 0.00% 4.72% 0.00%
Taiwan Asia Aa3 0.53% 5.31% 0.59%
Tajikistan Eastern Europe & Russia B3 5.75% 11.02% 6.30%
Tanzania Africa B2 4.86% 10.05% 5.33%
Thailand Asia Baa1 1.41% 6.27% 1.55%
Togo Africa B3 5.75% 11.02% 6.30%
Trinidad and Tobago Caribbean Ba1 2.21% 7.14% 2.42%
Tunisia Africa B2 4.86% 10.05% 5.33%
Turkey Western Europe B2 4.86% 10.05% 5.33%
Turks and Caicos Islands Caribbean Baa1 1.41% 6.27% 1.55%
Uganda Africa B2 4.86% 10.05% 5.33%
Ukraine Eastern Europe & Russia B3 5.75% 11.02% 6.30%
United Arab Emirates Middle East Aa2 0.44% 5.20% 0.48%
United Kingdom Western Europe Aa3 0.53% 5.31% 0.59%
United States North America Aaa 0.00% 4.72% 0.00%
Uruguay Central and South America Baa2 1.27% 6.56% 1.68%
Uzbekistan Eastern Europe & Russia B1 3.98% 9.08% 4.36%
Venezuela Central and South America C 17.50% 23.90% 19.18%
Vietnam Asia Ba3 3.18% 8.21% 3.49%
Zambia Africa Ca 10.60% 16.34% 11.62%
Frontier Markets (no sovereign ratings)
Country PRS Composite Risk Score ERP CRP Default Spread
Algeria 57.25 13.44% 8.72% 7.96%
Brunei 80 5.54% 0.82% 0.75%
Gambia 63.75 11.02% 6.30% 5.75%
Guinea 53.5 16.34% 11.62% 10.60%
Guinea-Bissau 62 11.98% 7.26% 6.63%
Guyana 65.75 10.05% 5.33% 4.86%
Haiti 52.75 16.34% 11.62% 10.60%
Iran 59.25 13.44% 8.72% 7.96%
Korea, D.P.R. 50.75 16.34% 11.62% 10.60%
Liberia 53.5 16.34% 11.62% 10.60%
Libya 58.25 13.44% 8.72% 7.96%
Madagascar 63.25 11.02% 6.30% 5.75%
Malawi 58.75 13.44% 8.72% 7.96%
Myanmar 63.75 11.02% 6.30% 5.75%
Sierra Leone 58.75 13.44% 8.72% 7.96%
Somalia 50.5 16.34% 11.62% 10.60%
Sudan 38.25 23.90% 19.18% 17.50%
Syria 47 23.90% 19.18% 17.50%
Yemen, Republic 50 23.90% 19.18% 17.50%
Zimbabwe 52.25 16.34% 11.62% 10.60%

For more details, download the excel spreadsheet that contains this data on my website: http://www.stern.nyu.edu/~adamodar/pc/datasets/ctryprem.xlsx
If you are interested in my approach to computing the equity risk premium, download my magnum opus (just kidding):
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3550293

And my paper on measuring country risk
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3653512

Last updated: January 2021

Aswath Damodaran